Can I avoid paying back my student loans if I file bankruptcy

In very rare circumstances student loans can be discharged in bankruptcy. To get a discharge, after filing the bankruptcy, the debtor needs to file an adversary proceeding within their bankruptcy and prove with admissible evidence he/she is entitled to discharge the loans. The bankruptcy judge will determine if an undue hardship will affect the dependents of the debtor. If you do not have dependents, the chances of getting a discharge is very low unless you are disabled. If the undue hardship standard is met, and if a good faith effort to pay the loans has been well documented, the court has discretion to discharge the loans in their entirety or partially.

Undue Hardship is defined as the inability (now or in the future) to repay the student loan debt and still maintain a minimal standard of living. The judge will look at 3 areas of concern:

Would you be able to maintain a minimal standard of living if you had to repay the loan?

Are the financial difficulties you face temporary, or are they expected to continue for several years?

Have you made reasonable efforts to keep up with your payments before filing for bankruptcy?

The judge will also consider whether you’re seeking a discharge for your student loan hardship in good faith. That means he or she will determine if you have tried to repay your loans and failed, or whether you created a hardship for yourself through poor financial decision-making.

Cal Stead is a Partner in the Bakersfield office of Borton Petrini, LLP.

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